Televisions just not a Best Buy this Christmas

So what's a best buy? Not a TV (AP)

Best Buy Co.’s third-quarter net income fell more than expected as it lost sales of lower-priced TVs and laptops to competitors, and more expensive 3-D and Internet-connected TVs failed to catch on.

Shares of the largest U.S. electronics chain fell nearly 15 percent Tuesday as the results raised fears over Best Buy’s holiday season. The company also cut its guidance below analyst expectations.

Best Buy benefited when Circuit City went out of business last year. Now it’s getting squeezed between online sellers like Amazon.com and discount stores like Walmart and Target. All sharply reduced prices on flat-screen TVs to drive sales during Black Friday and the busy shopping weekend over Thanksgiving.

CEO Brian Dunn said Best Buy’s strategy instead is to offer competitive prices for brand-name TVs rather than discounting lower-end TVs to drive sales.

But that strategy caused a revenue shortfall because pricier 3D TVs and Internet-connected TVS proved less popular than Best Buy expected — while tablet computers and smartphones have captured consumer’s minds and wallets.

According to research firm NPD Group Inc., TV units sold increased 2 percent from January through November 2010, but overall revenue from TVs fell 8 percent, indicating people are buying cheaper TVs and a majority of households already have flat-panels.

“We’re on the downslope on the flat-panel TV product life cycle,” said Morningstar analyst R.J. Hottovy. More are turning to tablet computers, smart phones and e-readers instead. “Portable electronics are driving sales of consumer electronics right now.”

Best Buy, based in Minneapolis, said its market share in TVs, laptops and video game software fell during the quarter, which ended the day after Thanksgiving.

Revenue in stores open at least 14 months fell 5 percent in the U.S., hurt by lower revenue from TVs and entertainment hardware and software.

Best Buy said it has stepped up discounts for 32-inch TVs in December and increased its offerings of laptops under $400.

“We’ve made price adjustments in the third quarter and in the fourth quarter (on laptops) to be more aggressive, because the consumer is definitely showing a propensity at the low end,” said president of the Americas Mike Vitelli.

Even many shoppers willing to spend more for the latest technology seem to be taking a “wait and see” position. Analyst Paul Gagnon, an analyst for the research group DisplaySearch, said 3D TVs haven’t caught on yet because they are expensive and there hasn’t been much programming available.

“There’s a bit of a chicken-and-egg dynamic — content makers don’t want to make 3-D (shows) if there isn’t going to be anybody to watch them,” he said. But he expects the technology will eventually be standard on TVs, and consumers have showed they’re willing to wait for prices to come down.

Best Buy said some shoppers are also holding off on buying laptops and netbooks because they’re waiting to buy a tablet as more come out next year.

“More overall customers migrating to tablets and customers are waiting as they consider their purchase decisions on tablets versus netbooks and notebooks,” Dunn said.

Best Buy’s net income in the fiscal third quarter fell 4 percent to $217 million, or 54 cents per share, from $227 million, or 53 cents per share, last year. Analysts polled by Thomson Reuters, on average, expected 61 cents per share.

Revenue fell 1 percent to $11.89 billion, from $12.02 billion last year. Analysts expected revenue of $12.45 billion. Revenue in stores open at least 14 months fell 3.3 percent.

The measure is considered an important measure of a retailer’s financial health because it excludes stores that open or close during the period.

“Best Buy has seen discount store and online competitors get better in the category, while smaller regional players continue to expand,” said Jefferies & Co. analyst Daniel Binder. “Combined with little benefit from new TV technologies as well as iPad cannibalization in mobile computing, Best Buy is left in a difficult position near term.”

Best Buy now expects net income of $3.20 to $3.40 per share, down from $3.55 to $3.70 per share, hurt by lower U.S. revenue. Analysts expected $3.59 per share.

Shares fell $6.18, or 14.8 percent, to $35.52. The stock has traded between $30.90 and $48.83 during the past 52 weeks.

Copyright © 2010 The Associated Press

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4 Responses to "Televisions just not a Best Buy this Christmas"

  1. griff  December 15, 2010 at 12:08 pm

    No one has any f**king money.

  2. Bill Cravener  December 15, 2010 at 2:41 pm

    “No one has any f**king money.”

    Well, not everybody’s broke griff. I happen to bust my ass and make a buck anyway my various talents enable.

    As to the subject, ever try watching porn on them little hand-held thingies? I want 62 inches of 3D flat screen connected to fiber optic high-speed bandwidth! Phuk Dish and DirecTV let me choose what it is I wish to watch by surfing the web. Ever watch 720p or 1080p High Def Full Screen YouTubes on a 52 or 62 inch flat? Awesome!!

    • griff  December 15, 2010 at 6:38 pm

      Long time, no see Mr. Cravener.

      Yeah I happen to have a Sony 60-inch LCD myself. It’s like it was invented for football and hockey, which is about all the action it sees, aside of course for Tiger Woods on the PS3 and a little Discovery and History Channel.

      I used to have money. I wasn’t rich by any stretch, but I was able to enjoy some simple niceties. Thankfully I bought my TV when I did.

      People with disposable income are still buying these things, but the moral to the story is that those with disposable income is dwindling, so these things are no longer selling.

      But of course they say that these things just “aren’t taking off like we thought,” totally ignoring the fact that they would probably be flying off the shelves if we didn’t have a quarter of the work force on $1200 a month unemployment and the rest of the gainfully employed (less the bureaucrats, who always get their raises) taking pay or cuts in hours.

      Gee, I can’t understand why all these people aren’t spending a month’s income on a television! Come on America, get out there and scarf up those TV’s!

      Damn the heat! To hell with the mortgage! Best Buy’s stock is dropping! The shareholders need you to Spend! Spend! Spend! So you might have to live in the cardboard box it came in in six months. So what? Look at that f**king picture quality!

      Perhaps if some of these gadgets and gizmos that every one wants were actually produced here in America?

      • Carl Nemo  December 15, 2010 at 7:14 pm

        Welcome back Bill… : )

        You guys shor are hi tech. My household is still getting along with a 27″, 24″ and 13 inch ‘old fashioned’ CRT’s of Sony and Panasonic with an average lifespan of now going on 20 years. Only the 13″ Sony Trinitron has been to the shop for repairs for replacement of a single capacitor. The repairman, who owns a small proprietor shop, an electronic geek who’s knowledge base spans from tubes to top hat transistors, then on to LSI, VLSI ckts etc. had almost a love affair with the Trinitron. He couldn’t wax poetically enough about the quality and build of these dinosaurs. In fact I thought I’d have trouble getting it back from him so I let him enjoy it for an extra week in his shop. He also did a complete color alignment of the guns etc. gratis. Truly a stunning picture.

        His shop is filled with LCD’s, Plasma’s, DCP’s and other modern technology that he personally thinks is all inferior regardless of the resolution and are basically throwaways once they crap out. He’s got great deals on just about every brand you can think of all for cheap due to the fact people can’t afford to pay for the repairs even though he takes $40 to diagnose the problems. Of course he fixes the better candidates and sells them and offers a whopping one year warranty on his used one’s. I know for sure that I’ll buy a used model from him in the future, then again maybe not, if my ol’ bessies hang on. He informed me of the fragility of LCD’s to direct impact with plasma’s being somewhat more rugged. Evidently families with a bunch wild younguns buy them and manage to bounce a ball or little brother or sister’s head into the screen leaving a large black spot of damaged pixels which aren’t repairable. He showed me some examples. Ouch in the wallet for sure!

        The point being is that my wife and I are quite well off, but are also “conservators” and don’t believe in jumping onto the latest tech bandwagon as most Americans do while leaving most broke butt poor or in perma-debt.

        As far as radios are concerned we have a few tube and hybrid tube/transistor models that still work great. The Zenith, a pure tube model will be resistant to EMP in the event of nuclear war that way we can listen to atmospherics which will be the only thing left on the air…ahhh finally peace and quiet…no? :D

        Carl Nemo **==

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